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Opinion

The Impact of Artificial Intelligence (AI) on Finance

The Impact of Artificial Intelligence (AI) on Finance

“Technology, through automation and artificial intelligence, is definitely one of the most disruptive sources” ― Alain Dehaze

3 min read

Artificial Intelligence (AI)

The Impact of Artificial Intelligence (AI) on Finance

“Mutual funds were created to make investing easy, so consumers wouldn’t have to be burdened with picking individual stocks” ― Alain Dehaze

3 min read

Artificial intelligence (AI) is reshaping how people see and interact with the world, and the Finance industry is no exception to this.

Already, we are witnessing new ways of writing about financial markets and ways of streamlining data analysis processes on a massive scale in just the blink of an eye. With its ability to process such vast amounts of data at such high speeds, whilst also then having the ability to make complex decisions, AI is transforming various aspects of finance, from investment management to risk assessment and customer service.

How is AI doing this? Find out below!

The Impacts on Investment Management

When we look at impacts on investment management, we can see that artificial intelligence (AI) is changing how analytics are used to identify patterns, forecast market trends, and refine investment strategies. These AI algorithms are able to formulate data-driven patterns and correlations that human analysts may overlook.

This could lead to fund managers and investment analysts making better informed decisions, leading to enhanced portfolio performance. However, whilst AI processes are very useful in such cases, it is important to retain a human element as relying on AI algorithms (or any algorithms for that matter) can come with issues that are often realised too late.

Such issues can include their predictive capabilities being manipulated or potentially producing the wrong answer that results in a negative return. Whilst not the norm, these potential risks should be recognised and protected against.

Improving Customer Experience

You may notice when visiting various websites that a key way AI is improving the customer experience is through the implementation of chatbots and virtual assistants. The financial sector is no exception to this and you could well be chatting to an AI bot when visiting investment websites!

These AI-driven tools are able to stay awake when a human counterpart cannot, providing 24/7 support and thus improved customer satisfcation and operational efficiency.

Such virtual agents can handle routine enquiries, transactions and even engage in potentially meaningful conversations by addressing customer queries promptly and accurately. In addition, AI systems can allow humans to spend more time on more complex issues, streamlining operations and reducing costs.

Strengthening Risk Management

AI-powered risk management systems analyse real-time market data to identify potential threats and implement proactive risk mitigation measures. Detection of such anomalies and enhancing fraud detection can protect financial institutions against fraudulent activities.

Furthermore, AI enables financial institutions to conduct more accurate and comprehensive risk assessments by, as mentioned already, analysing vast amounts of data from various sources. Such an approach to risk management can allow organisations to anticipate and mitigate potential threats before they escalate, thereby safeguarding assets and maintaining stability in the financial markets.

Facilitating Regulatory Compliance

AI can play an important role in ensuring regulatory compliance within the financial industry. By monitoring vast amounts of data and analysing transactions, AI algorithms can help financial institutions adhere to evolving regulatory requirements, reducing the risk of non-compliance penalties and enhancing transparency.

By streamlining the process, corrective action can be taken promptly, ensuring continued compliance and meeting of regulatory standards. By automating compliance procedures, AI not only reduces the burden on compliance teams but also minimises the likelihood of human error, ensuring accuracy and consistency in regulatory reporting.

It is also possible for AI-powered compliance tools to adapt to changes in regulations more efficiently than traditional manual methods. Machine learning algorithms can quickly incorporate updates to regulatory frameworks, ensuring that financial institutions remain up-to-date and compliant with the latest standards. This agility in regulatory compliance can help navigate complex regulatory landscapes more effectively, mitigating the risk of regulatory fines and reputational damage while maintaining the trust of Clients and customers.

Robot Revolution or Handy Companion?

It would likely be inadvisable to rely 100% on AI processes throughout your business, day-to-day life or any other circumstances. Hence, it is probable that human operators will be necessary going forward.

This means that AI is able to complement the day-to-day tasks of professionals in the finance sector and enhance the services that are able to be provided to Clients.

However, AI is not right for everyone! There are certainly downsides to using AI, including a potential lack of personalisation, potential for manipulation and more. Certain areas may require the diligent attention of a human and are potentially outside of the remit of AI.

As with stock markets, the future cannot be known and AI will likely continue to develop over the coming years.

With Patterson Mills, you can be sure of a 100% human service, tailored to you. So, get in touch with us and book your initial, no-cost and no-obligation meeting and talk to one of our Advisers today!

Send us an e-mail to contactus@pattersonmills.ch or call us direct at +41 21 801 36 84 and we shall be pleased to assist you.

Please note that all content within this article has been prepared for information purposes only. This article does not constitute financial, legal or tax advice. Always ensure you speak to a regulated Financial Adviser before making any financial decisions.

Categories
Investments

Re-Invest Or Withdraw? Accumulation Versus Income Funds

Re-Invest Or Withdraw? Accumulation Versus Income Funds

“Mutual funds were created to make investing easy, so consumers wouldn’t have to be burdened with picking individual stocks” ― Scott Cook

3 min read

Dividend Investing vs. Income Withdrawals - Accumulation - Compounding - Investments

Re-Invest Or Withdraw? Accumulation Versus Income Funds

“Mutual funds were created to make investing easy, so consumers wouldn’t have to be burdened with picking individual stocks” ― Scott Cook

3 min read

Within the world of mutual funds and exchange-traded funds (ETFs), you will often have the choice to opt for accumulation or income.

What’s the difference you may ask?

Put simply, accumulation funds re-invest any income or dividends generated by the underlying assets back into the fund.

On the other hand, income funds distribute any income generated by the underlying assets to you, the investor. This is often in the form of cash dividends or interest payments.

However, just knowing what these are is not necessarily enough to make informed decisions on your investments. Which type is suitable for you? What are the benefits? Read on to find out!

Accumulation Funds

Accumulation funds, often shortened to ‘Acc’ or known as ‘capital growth’ funds, are designed for those who wish to re-invest any income back into the fund in which they are invested.

With this type of investment, the process is automatic and any dividends, interest payments or other distribution types will be re-invested without you having to do anything (at least, nothing beyond buying into the fund in the first place!).

Why might you wish to do this? Because you will benefit from compound growth over time that could have a huge impact on the gains you see when you come to withdraw in the future!

As an example, should you have CHF 1’000 invested and receive a CHF 100 distribution (e.g. as a dividend payment), you would then have CHF 1’100 invested (if you did not take it as income). This is CHF 100 more that can potentially increase both your returns and even future distribution payments.

The longer you leave your funds, the more time this type of approach has to grow your wealth. Hence, this strategy is typically better-suited if you have a longer-term investment horizon and prioritise capital appreciation.

Income Funds

Income funds, you will not be surprised to read, are also sometimes known under another name!

Not only are the often shortened to ‘Inc’, they are alternatively known as ‘distribution’ funds (sometimes shortened to ‘Dist’). As mentioned, these types of investment provide regular income paid out as dividends, interest or through other means.

Income funds are generally more suitable for when you are retired or if you are relying on investment income to cover defined living expenses.

Naturally, this makes the key advantage of income funds exactly that: their ability to provide a steady stream of income. 

What’s more, this income is provided to you without the need to sell off your shares!

Which One Is Right For You?

Now you know what both types of funds are, who they may be more suitable for and how they could benefit you.

This then leaves the question: which one should you choose?

Naturally, each of you reading this will be unique and there is no one-size-fits-all answer.

So, when deciding between accumulation or income funds, consider your investment objectives, risk tolerance and income needs. If you have quite some time before you wish to access your investments, you may be more suited to accumulation funds. On the other hand, income funds provide a regular income that you may prefer.

However, in both cases, assess any tax implications, fees and the benefits you may receive from compounding, or the potential drawbacks if you take the income out of the investment.

Here For You

There are more considerations than those which are in this article, and so you are must do your own research before making any decisions.

Yes, it can be complex, but Patterson Mills are here to help and explain your options in a jargon-free manner that ensures your complete understanding of your most effective route forward.

So, get in touch with Patterson Mills and book your initial, no-cost and no-obligation meeting. Your future financial success is our priority!

Send us an e-mail to contactus@pattersonmills.ch or call us direct at +41 21 801 36 84 and we shall be pleased to assist you.

Please note that all content within this article has been prepared for information purposes only. This article does not constitute financial, legal or tax advice. Always ensure you speak to a regulated Financial Adviser before making any financial decisions.